The Japanese rating agency Rating and Investment Information (R&I) announced on Monday that it has raised the Greek economy rating to investment grade BBB-, with a stable outlook.
The investment grade is considered a harbinger of new upgrades by rating agencies recognized by the European Central Bank. R&I’s previous rating was BB+, stable.
The outcome of the elections was positive for the Greek economy
In a report, R&I cited six positive developments behind its decision:
– The big electoral win of the governing party in June was a result that safeguarded the continuation of policies aiming to rejuvenate the Greek economy and fiscal restructuring and raised expectations for higher growth rates based on investments and reforms, along with a steady improvement of public debt.
– The Greek economy grew more than the Eurozone average in 2022 and it was projected to grow strongly this year.
– Progress in restructuring NPEs, leading the NPE rate to single-digit levels.
– Improvement in the fiscal balance. The government reported a small primary surplus in 2022 and envisaged a primary surplus of 1.1% of GDP this year.
– General government debt fell to 171.3% of GDP in 2022, from more than 200% in 2020, with the government expecting the public debt to fall to 162.6% in 2023.
– Efforts to secure additional funding from REPowerEU Plan, which is an EU plan for saving energy, producing clean energy, and diversifying our energy supplies.
Greek economy stays on a solid track
“The Greek economy stays on a solid track despite the uncertain economic environment in Europe,” R&I said and added that the primary balance has turned to surplus and the government debt ratio has fallen below the pre-pandemic levels.
“The election held in June 2023 gave the ruling party led by Prime Minister Kyriakos Mitsotakis a major victory that secured his second term under the parliamentary majority.
“The result has cemented the continuation of policies sought by the Mitsotakis administration aiming at the revitalization of the Greek economy and fiscal consolidation, raising expectations for strengthening the economic growth potential driven by investment and reforms as well as for continuous improvement in the government debt ratio.
“Also taking into account confirmation of further stability in the financial sector along with the said factors, R&I has upgraded the Foreign and Domestic Currency Issuer Ratings to BBB-” the agency said.
In May, Goldman Sachs said that Greece is “on the cusp” of regaining an investment-grade rating more than 12 years after Greece’s credit rating was impacted by the financial crisis.
According to Goldman Sachs, the second-largest investment bank in the world, Greece has been outperforming its peers in the euro area in terms of its rate of economic growth. Additionally, the country’s inflation rate is falling faster than in other European countries.
Goldman Sachs commented on Greece’s “remarkably strong” level of economic activity and dramatic turnaround in economic health since the financial crisis which rocked the county in 2009. The improvement in Greece’s investment grade rating may attract more long-term investors back to the country.